You’re considering selling your property on a lease option. You’re being proactive and smart by writing down your tenant screening criteria in advance. You’re wondering if you should require that your tenant buyers have great credit to offer them a lease option.
Here are my thoughts.
If someone has a down payment (which I strongly recommend that you require for doing a lease option) and good credit, I would recommend that they go get a loan and buy a house traditionally. I would not suggest that they buy a property from an investor with a lease option.
Most of the tenant buyers that inquire about doing a lease option have some type of credit related challenge preventing them from buying a home today. Often times, they have a prior bankruptcy, foreclosure, short sale or other credit blemishes. They are actively improving their credit situation so they can qualify for a traditional loan and buy a home in a more traditional manner. The lease option is a way for them to select their house today, share in some of the future appreciation and give themselves time to improve their credit.
Sometimes you’ll find a tenant buyer that has great credit, but something else is preventing them from getting a loan right away. For example, they may need more time on the job before a lender will loan to them. But this is the exception rather than the more common rule.
So, to directly answer the question: I usually do not require that tenant buyers have great credit. I am typically catering to the group of people that had a credit challenge in the past, but are actively working on improving their credit and want an opportunity to be a homeowner. My clients doing lease options and I can help with that.
Lease Option FAQs
- Do you recommend changing your option fee criteria for lease option properties you already own?
- How much of an option fee do you recommend on Lease Options?
- Do I return the option fee if the tenant buyer does not buy the home on a lease option?
- What does it mean to sell on a Lease Option?
- What is a Lease Option?